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Brazil and the Politics of Neoliberalism: President Rousseff DeclaresWar on the Working ClassBy Prof. James PetrasGlobal Research, December 14, 2014

Url of this article:http://www.globalresearch.ca/brazilandthepoliticsofneoliberalismpresidentrousseffdeclareswarontheworkingclass/5419732

The Brazilian working class is facing the most savage assault on its living standards in over adecade. And it is not just the industrial workers who are under attack. The landless rural workers,public and private salaried employees, teachers and health professionals, the unemployed andthe poor are facing massive cuts in income, jobs and welfare payments.

Whatever gains were made between 2003 – 2013 will be reversed. Brazilian workers face a‘decade of infamy’. The Rousseff regime has embraced the politics of “savage capitalism” aspersonified in the appointment of two of the most extreme advocates of neoliberal policies

The “Workers Party” and the Ascendancy of Finance Capital

In early December 2014, President Rousseff appointed Joaquin Levy as the new Finance Minister in effect the new economicczar to run the Brazilian economy. Levy is a leading member of the Brazilian financial oligarchy. Between 20102014 he waspresident of Bradesco Asset Management, an asset arm of the giant conglomerate Bradesco, with more than $130 billion dollarsunder management. Since his doctoral days at the U of Chicago, Levy is a loyal follower of neoliberal supremo Professor MiltonFriedman, former economic adviser to Chilean military dictator Augusto Pinochet. As a former top official in the InternationalMonetary Fund (1992 – 1999), Levy was a strong advocate of the harsh austerity programs which a decade later impoverishedsouthern Europe and Ireland. During the Presidency of Henrique Cardoso, Levy served as a top economic strategist, directlyinvolved in the massive privatization of lucrative public enterprises – at bargain basement prices – and the liberalization of thefinancial system which facilitated the illicit financial outflow of $15 billion a year. Levy’s presence as a prominent member of Brazil’sfinancial oligarchy and his deep, longstanding ties to international financial institutions is precisely the reason President Rousseffput him in charge of the Brazilian economy. Levy’s appointment is part and parcel of Rousseff’s embrace of a new strategyof vastly increasing the profits of foreign and domestic finance capital, in the hope of attracting large scale investments to endeconomic stagnation.

For President Rousseff and her mentor, exPresident Lula DaSilva, the entire economy must be directed to gaining the“confidence” of the capitalist class.

The social policies which were implemented earlier are now subject to elimination or reduction, as the new financial czar Joaquin“Jack the Ripper” Levy, moves forward to implement his “shock therapy”. Deep and comprehensive cuts in labor’s share ofnational income is at the top of his agenda. The objective is to concentrate wealth and capital in the upper ten percent in hopesthat they will invest and increase growth.

While Levy’s appointment represents a decidedly turn to the extreme right, the economic policies and practices of the previoustwelve years laid the foundations for the return of a virulent version of neoliberal orthodoxy.

The Economic Foundations for the Return of Savage Capitations

During the electoral campaign in 2002, Lula DaSilva signed off on an economic agreement with the IMF which guaranteed abudget surplus of 3%. Lula sought to reassure bankers, international financiers and multinationals that Brazil would pay itscreditors, increase foreign reserves for profit remittance and illicit financial flows overseas.

The Lula regime’s adoption of conservative fiscal policies, was accompanied by his austerity policies, reducing public employees’salaries and pensions and providing only marginal increases in the minimum wage. Most of all, Lula supported all of the corruptprivatizations which took place under the preceding Cardoza regime. At the end of Lula’s first year in office, 2003, Wall Streethailed Lula as the “Man of the Year” for his “pragmatic policies” and his demobilization and deradicalization of the major tradeunions and social movements. In January 2003, President Lula Da Silva appointed Levy as Treasury Secretary, a position he helduntil 2006 – the most socially regressive period of the Da Silva Presidency.This period also coincided with a series of enormouslylucrative multibillion dollar corruption scandals involving dozens of top PT officials in the Lula regime receiving kickbacks fromleading construction companies

Two events in the middle 2000’s allowed Da Silva to moderate his policies and introduce limited social reforms. The commodityboom – a sharp increase in the demand and prices of agromineral exports filled the coffers of Treasury. And increased pressurefrom the trade unions, rural movements and the poor for a share in the economic bonanza led to increases in social spending, wages, salaries and easy credit without affecting the wealth, property and privleges of the elite. With the economic boom, Lulacould also satisfy the IMF, the financial sector and the business elite with subsidies, tax breaks, low interest loans and lucrative“overpriced” state contracts. The poor received 1% of the budget via a “family allowance” a $60 dollar a month handout and lowpaid labor received a higher minimum wage. The cost of social welfare was a fraction of the 40% of the budget that the banksreceived in payments of principle and interest payments on dubious public debt incurred by previos neoliberal regimes.

With the end of the boom, the government of Rousseff has reverted back to Lula’s orthodox policies of 2003 – 2005 and reappointed Levy to carry them out.

Levy’s Shock Therapy and Its Consequences

Levy’s task of reconcentrating income, raising profits and revertng social policies is much harder in 2014 – 2015 than it was in2003 – 2005. Mainly because, earlier, he was merely continuing the policies of the Cardoso regime – and Lula promised theworkers it was only temporary. Today Levy must cut and slash gains that workers and the poor take for granted. In fact in 2013 –2014 mass urban movements pressed for greater social expenditures for transport, education and health.

To advance Levy’s shock therapy ,at some point, repression will be necessary ,as was the case in Chile and Southern Europewhen similar austerity policies depressed incomes and multiplied unemployment.

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Levy proposes to rescue the interests of finance capital by taking several crucial measures which will be in line with the agenda ofWall Street, City of London and the Brazilian financial moguls. Taken in their entirety, Levy’s financial policies amount to “shocktreatment” – harsh,rapid economic measures applied against workers living standards, equivalent to electric shocks to patients withdisorders ,applied by deranged psychologists who claim that “pain is gain”, but more frequently than not, turn patients into zombiesor worse.

Levy’s first priority is to cut and slash public investments, pensions, unemployment payments and public sector salaries. Under thepretext of “stabilizing the economy” (for the financial groups) he will destabilize the household economy of tens of millions. He willrescind tax breaks for the mass of consumers buying cars, household appliances and ‘white goods’, thus increasing the costs tomillions of working class households or pricing them out of the market. Levy’s purpose is to unbalance household budgets(increase debt over income) in order to increase the state budget surplus and ensure full and prompt debt payments to creditorslike his own Bradesco conglomerate.

Secondly, Levy will “adjust” prices. More specifically end price controls on fuel, energy and transport so that the financial oligarchswith millions of shares in those sectors can jackup prices and “adjust” their wealth upward into the billions of dollars. As a result,the working and middle class will have to spend a greater share of their declining income for fuel, transport and energy.

Thirdly, Levy will probably let the currency weaken to promote agromineral exports under the guise of greater “competiveness”.But a cheaper currency will increase the cost of imports, especially, of basic foodstuffs and manufactured goods. The de factodevaluation will hit hardest the millions who cannot hedge their savings and favors the financial speculators who will capitalize oncurrency movements. And comparative studies demonstrate that a cheaper currency doesn’t necessarily increase productiveinvestments.

Fourthly, Levy is likely to claim that energy shortfalls due to drought, which has reduced Brazil’s hydropower dams, requires“reform” of the energy sector , Levy’s euphemism for privatization.He will propose to selloff the semipublic billion dollar petroleumgiant Petrobras,and accelerate the privatization of offshore exploitation sites, at terms favorable to big investment banks.

Fifthly, Levy is likely to slash and burn environmental and business regulations, including those affecting the rainforest, labor andIndian rights, to facilitate the easy entry and fast exit of financial capital.

Levy’s “shock therapy” will have a profound social and economic impact on Brazilian society. Every indication, from past andpresent experiences, is that in every country “Chicago Boys”, like Levy, have applied their “shock” formula, has resulted inprofound economic recession, social regression and political unrest.

Contrary to the expectations of President Rousseff, cuts in credit, salaries and public investment will depress the economy – andsend it from stagnation into recession. Retrograde budget balancing lessens demand and does not induce productive capitalflows. The most dynamic growth sectors in manufacturing, the car industry, will be sharply and adversely affected by the increasein taxes on purchases. And the same goes for appliances.

Heretofore the expansion of public investment has been the main driving force of even the current meagre growth. There is norational reason to believe that vast flows of private capital will suddenly take up the slack, especially in a shrinking market. This isespecially true, if as is likely to happen, class conflict intensifies from across the board reductions in wages, salaries and livingstandards.

Levy, like all free market fanatics, will argue that recession and regression are shortterm, necessary and ,will succeed “in the longrun”. But in all contemporary countries pursuing his shock formula , the result has been prolonged regression. Greece, Spain,Italy and Portugal are in the seventh year of austerity induced depression and their public debt is growing.

The Real Effective Consequences of Shock Therapy

We have to discard the ideological “stability and growth” claims of the Levyites and look at the real results of the policies hepromises.

First and foremost, inequalities will increase because whatever income gains ensue will be concentrated at the top. Governmentderegulation and fiscal and exchange rate policies, will deepen the imbalances in the economy, favoring creditors over debtors,foreign finance over local manufacturers, owners of capital over wage workers, the private sector over the public.

Levy will indeed “secure the confidence of capital” because what is dubbed as “investor confidence” rests on an unimpeded licenseto plunder the environment, reduce wages and eploit a growing reserve army of unemployed.

Conclusion

Levy’s shock therapy will heighten class tension and inevitably result in the breakdown of the social pact between the socalledWorkers Party regime and the trade unions, the landless rural workers and the urban social movements.

Rousseff and the leadership of the selfstyled “Workers’ Party” regime, faced with economic stagnation resulting from the decline incommodity prices and the decision of private capital to withhold investments, could have chosen to socialize the economy, endcrony capitalism and increase public investment.Instead it capitulated. Rousseff has recycled the orthodox neoliberal policieswhich Lula implemented during the first two years of his regime.

Instead of mobilizing workers and professionals for deeper structural changes, Rousseff and Lula Da Silva are counting on the “leftwing” of the PT to complain, criticize and conform. They are counting on the coopted leaders of the trade union confederation(CUT), to hyperventilate and confine themselves to inconsequential symbolic protests which will not disrupt Levy’s “shock therapy”. However, the scope, depth and extremism of Levy’s socalled adjustment and stabilization program will provoke general strikes,first and foremost in the public sector. The cutbacks in the auto industry and rise in unemployment, will result in job action in themanufacturing sector. The cuts in public investment and rise in the costs of transport, health care and education will revive themass urban movements.

Within a year, Rousseff and Levy’s shock policies will convert Brazil into a boiling cauldron of social discontent. Lula’s pseudopopulist gestures and empty rhetoric will have no effect. Rousseff will not be able to convince working people to accept Levy’sclass biased “austerity” program, his incentives “to gain the confidence of international markets” and his incomes policies shrinkingincomes of the vast majority of working people.

Levy’s policies will deepen the recession, not “reawaken the animal spirits of entrepreneurs”. After a year of “more pain and nogain” (except for higher profits for financiers and agromineral exporters), President Rousseff will face the inevitable negativepolitical outcome of having lost the support of the workers, middle class and rural poor without gaining the support of the businessand financial elite – they have their own reliable party leaders. Once having put in place his radically regressive free marketpolicies, and having provoked massive popular discontent, Levy will resign and return to the presidency of Bradesco, the multibillion dollar investment fund,claiming “mission accomplished”

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Rousseff might replace Levy and try to ‘moderate’ his ‘shock therapy’. But by then it will be too little too late. The Workers’ Partywill end up in the dust bin of history . Rousseff’s decision to appoint Levy as economic czar is a declaration of class war .And inorder to win the class war, we cannot exclude that the radically regressive policies will be enforced by state violence – therepression of mass urban protests, the savage dislodgement of peaceful landless rural workers occupying fallow lands.

The “Workers’ Party” regime’s turn from “inclusive neoliberalism” to Friedmanite free market extremismwill radicalize andpolarize Brazilian society. The oligarchy will push to remilitarize civil society. This in turn, will spur the growth ofclass conscious social movements, like those that ended twenty years of military rule. Perhaps this time, the social upheaval maynot end in a liberaldemocracy; perhaps the comming struggle will bring Brazil closer to a socialist republic.

Disclaimer: The contents of this article are of sole responsibility of the author(s). The Centre for Research on Globalization will not be responsible forany inaccurate or incorrect statement in this article.

Copyright © Prof. James Petras, Global Research, 2014